ECON 202 Learning Module 2

2.6) Positive analysis is concerned with "what ought to be," while normative analysis is concerned with "what is." A. True B. False

B. False

2.6)Which of the following is a positive economic statement? A. The government should revamp its immigration policies. B. U.S. citizens should only buy products which are produced in the United States. C. Raising the tax on gasoline raises the selling price of gasoline. D. The government should ban the production and sale of incandescent light bulbs.

C. Raising the tax on gasoline raises the selling price of gasoline.

2.1) Using basic assumptions you can determine A. Why markets are efficient. B. When markets are efficient. C. When government intervention helps or hurts economic performance. D. All of the above. E. A and B above.

D. All of the above.

2.6)Which of the following is a normative economic statement? A. Farmers should not be allowed to grow and sell genetically-modified crops. B. With rising home prices and falling mortgage interest rates, the amount of home foreclosures has decreased. C. Rising corn prices have increased the price of corn-based ethanol. D. The federal government is considering increasing regulations on the use of fossil fuels to promote the use of wind power.

A. Farmers should not be allowed to grow and sell genetically-modified crops.

2.6)Which of the following is a positive economic statement? A. If the price of beef falls, a larger quantity of it will be bought. B. The standard of living in the United States is too low. C. The U.S. government should increase regulations on the banking industry. D. The government should implement a national consumption tax

A. If the price of beef falls, a larger quantity of it will be bought.

2.6) Which of the following is a normative economic statement? A. Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable. B. Rising global demand for coal has led to increases in the price of coal. C. The state of Texas is considering increasing funds for light-rail development to promote the use of public transportation. D. With rising mortgage rates and rising unemployment rates, the number of unsold homes has increased.

A. Pharmaceutical manufacturers should not be allowed to patent their products so prescription drugs would be more affordable.

2.7) ________ occurs when the direction of cause and effect is mixed up in a study. A. Reverse causality B. Adverse causality C. Limited information bias D. Omitted variable bias

A. Reverse causality

2.6)Which of the following is a normative economic statement? A. The price of wheat is too low. B. When the price of wheat falls, the cost of wheat-based products falls. C. The current low price of wheat is the result of increased worldwide supply. D. When the price of wheat falls, the quantity of wheat purchased rises.

A. The price of wheat is too low.

2.3) When voluntary exchange takes place, both parties gain from the exchange. A. True B. False

A. True

2.6)"An increase in the price of gasoline will increase the demand for hybrid vehicles." This statement is an example of a positive economic statement. A. True B. False

A. True

2.2) The revenue received from the sale of ________ of a product is a marginal benefit to the firm. A. an additional unit B. only profitable units C. no units D. the total number of units

A. an additional unit

2.4) Economists assume that individuals: A. are rational and respond to incentives. B. prefer to live in a society that values fairness above all else. C. will never take actions to help others. D. behave in unpredictable ways.

A. are rational and respond to incentives.

2.3) John has two hours of free time this evening. He ranked his alternatives, first go to a concert, second go to a movie, third study for an economics exam, and fourth answer his e-mail. What is the opportunity cost of attending the concert for John? A. attending a movie B. studying for an economics exam C. attending a movie, studying for an economics exam, and answering his e-mail D. answering his e-mail

A. attending a movie

2.3)The extra cost associated with undertaking an activity is called: A. marginal cost. B. foregone cost. C. opportunity cost. D. net loss.

A. marginal cost

2.4) Suppose that some investors have decided that economic and financial uncertainty have made the prospect of investing in domestic stock markets more risky than investing in foreign stock markets, and therefore choose to invest in foreign markets. By using all available information as they act to achieve their goals, these investors are exemplifying the economic idea that: A. people are rational. B. people respond to economic incentives. C. optimal decisions are made at the margin. D. equity is more important than efficiency.

A. people are rational.

2.7) Economic models do all of the following except A. portray reality in all its minute details. B. make economic ideas explicit and concrete for use by decision makers. C. simplify some aspect of economic life. D. answer economic questions.

A. portray reality in all its minute details.

2.4) Economists assume that rational people do all of the following except: A. undertake activities that benefit others and hurt themselves. B. respond to economic incentives. C. weigh the benefits and costs of all possible alternative actions. D. use all available information as they act to achieve their goals.

A. undertake activities that benefit others and hurt themselves.

Trinh quits his $80,000-a-year job to become a full-time volunteer at a museum. What is the opportunity cost of his decision? A. 0 since he will no longer be earning a salary B. at least $80,000 C. depends on the "going rate" of museum employees D. the value he attributes to the joy of working at a museum

B. at least $80,000

2.3)The opportunity cost of going to an outdoor music festival is: A. zero because there are no overhead costs for an outdoor festival. B. equal to the highest value of an alternative use of the time and money spent on the festival. C. the value of the time spent at the festival. D. the cost of the festival ticket only. E. the enjoyment you receive from going to the festival.

B. equal to the highest value of an alternative use of the time and money spent on the festival.

2.4) Economists assume that rational behavior is useful in explaining choices people make: A. because irrational people do not make economic choices. B. even though people may not behave rationally all the time. C. because individuals act rationally all the time in all circumstances. D. even though people rarely, if ever, behave in a rational manner.

B. even though people may not behave rationally all the time.

2.4) Economists assume that the goal of consumers is to: A. do as little work as possible to survive. B. make themselves as well off as possible. C. consume as much as possible. D. spend all their income.

B. make themselves as well off as possible.

2.2) Suppose the U.S. government encouraged consumers to trade in their old automobiles for more efficient, new models by paying up to $5,000 for the old automobiles. These consumers who did trade in their old automobiles to take advantage of the government offer would be exemplifying the economic idea that: A. people are rational. B. people respond to economic incentives. C. optimal decisions are made at the margin. D. equity is more important than efficiency.

B. people respond to economic incentives.

2.3) The principle of opportunity cost is that: A. taking advantage of investment opportunities involves costs. B. the economic cost of using a factor of production is the alternative use of that factor that is given up. C. the cost of production varies depending on the opportunity for technological application. D. in a market economy, taking advantage of profitable opportunities involves some money cost.

B. the economic cost of using a factor of production is the alternative use of that factor that is given up.

2.1) The video describes the steps in simple arithmetic as proceeding from A. Numbers to cardinal numbers to addition to subtraction to division to multiplication. B. Numbers to addition to subtraction to division to multiplication. C. Numbers to cardinal numbers to addition to subtraction to multiplication to division. D. Cardinal numbers to numbers to addition to multiplication to subtraction to division. E. None of the above.

C. Numbers to cardinal numbers to addition to subtraction to multiplication to division.

2.6) Which of the following is a positive economic statement? A. Foreign workers should not be allowed to work for lower wages than the citizens of a country. B. People should not buy SUVs. C. Scarcity necessitates that people make trade-offs. D. The government should mandate electric automobiles.

C. Scarcity necessitates that people make trade-offs.

2.4) An item has utility for a consumer if it: A. has a high price. B. is something everyone else wants. C. generates enjoyment or satisfaction. D. is scarce.

C. generates enjoyment or satisfaction.

2.3) The highest valued alternative that must be given up to engage in an activity is the definition of A. marginal cost B. economic equity C. opportunity cost D. marginal benefit

C. opportunity cost

2.7) A correlation between two variables implies that: A. there is a cause-effect relationship between the two variables. B. when one variable changes, the other variable always changes by exactly the same amount. C. there is a mutual relationship between both the variables. D. it is impossible to measure one variable without measuring the other.

C. there is a mutual relationship between both the variables.

2.1) Which of the following can be derived from other assumptions about numbers. A. Subtraction. B. Multiplication. C. Division D. All of the above. E. B and C above.

D. All of the above.

2.1) Which of the following can be derived from other assumptions of economics A. Scarcity. B. Tradeoffs. C. Opportunity costs. D. B and C above. E. A and B above.

D. B and C above.

2.6)Which of the following is a positive economic statement? A. The U.S. government should not have bailed out U.S. auto manufacturers. B. The standard of living in the United States should be higher. C. The government should revamp the health care system. D. If the price of iPhones falls, a larger quantity of iPhones will be purchased.

D. If the price of iPhones falls, a larger quantity of iPhones will be purchased.

2.6) Which of the following is a normative economic statement? A. The current high price of gasoline is the result of strong worldwide demand. B. When the price of gasoline rises, transportation costs rise. C. When the price of gasoline rises, the quantity of gasoline purchased falls. D. The price of gasoline is too high.

D. The price of gasoline is too high.

2.7) A model refers to: A. a perfect replica of reality. B. a set of facts established by observation and measurement. C. facts, measurements, or statistics that describe the world. D. a simplified description, or representation, of reality.

D. a simplified description, or representation, of reality.

2.4) Marginal utility is the: A. total satisfaction received from consuming a given number of units of a product. B. satisfaction achieved when a consumer has had enough of a product. C. average satisfaction received from consuming a product. D. extra satisfaction received from consuming one more unit of a product.

D. extra satisfaction received from consuming one more unit of a product.

2.7) An omitted variable is a variable that: A. is purposely left out as it does not aid an economic analysis. B. is removed from a study as it can lead to the problem of reverse causality. C. does not cause other variables in a study to change when it changes. D. has been left out, and if included, would explain why the variables considered in a study are correlated.

D. has been left out, and if included, would explain why the variables considered in a study are correlated.

2.2) The extra cost associated with undertaking an activity is called: A. foregone cost. B. opportunity cost. C. net loss. D. marginal cost.

D. marginal cost.

2.3)The best alternative use of a resource is referred to as its: A. market price. B. marginal utility. C. sunk cost. D. opportunity cost.

D. opportunity cost.

2.4) Holding all other personal characteristics-such as age, gender, and income constant, economists would expect that: A. people with health insurance are less likely to be overweight than people without health insurance. B. there is no correlation between having health insurance and being overweight. C. people with health insurance are equally likely to be overweight as people without health insurance. D. people with health insurance are more likely to be overweight than people without health insurance.

D. people with health insurance are more likely to be overweight than people without health insurance.

2.4) Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave ________, meaning they make the best decisions given their knowledge of the costs and benefits. A. selfishly B. emotionally C. equitably D. rationally

D. rationally

2.3) Amy can study for an hour or spend that hour sleeping or going out for dinner. If she decides to study for the hour, the opportunity cost of the hour spent studying is: A. definitely going out to dinner because she must eat at some time. B. sleeping and going out for dinner. C. studying, since this is the choice she opted for. D. sleeping or going out for dinner, whichever she would have preferred the most. E. definitely going to sleep.

D. sleeping or going out for dinner, whichever she would have preferred the most.

2.4) By definition, economics is the study of: A. how to make money in the stock market. B. supply and demand. C. how to make money in a market economy. D. the choices people make to attain their goals, given their scarce resources.

D. the choices people make to attain their goals, given their scarce resources.

2.2) Making optimal decisions "at the margin" requires: A. making borderline decisions. B. making decisions according to one's whims and fancies. C. making consistently irrational decisions. D. weighing the costs and benefits of a decision before deciding if it should be pursued.

D. weighing the costs and benefits of a decision before deciding if it should be pursued.

2.3) On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to the library. Your opportunity cost is: A. not clear because not enough information is given. B. working out at the gym, having breakfast with friends, and sleeping late. C. zero because you do not have to pay money to use the library. D. working out at the gym.

D. working out at the gym.

2.1) Which of the following are assumptions needed for simple arithmetic A. Numbers exist. B. Multiplication. C. Addition. D. All of the above. E. A and C above.

E. A and C above.

2.2) The additional cost to a producer of hiring an additional unit of labor is called the marginal cost. A. True B. False

True